San Salvador– IFC, a member of the World Bank Group, has granted Fedecredito, in El Salvador, the first gender-focused financing backed by remittances.
The innovative operation seeks to expand loans to businesses led by women and micro, small and medium-sized enterprises (MSMEs).
MSMEs contribute a significant part of the country’s Gross Domestic Product (GDP), and are the second-largest source of employment, yet less than half own a bank loan or line of credit.
Women-owned enterprises have even greater barriers. Official World Bank data reveal that only 10 percent of them have a loan from a financial institution.
To address this challenge, IFC is providing Fedecredito with long-term funding of $60 million, backed by diversified payment rights (DPR), to extend loans to Salvadoran MSMEs, and particularly women entrepreneurs.
“This type of financing is not readily available in El Salvador, and with the COVID-19 pandemic it is even more important to provide the financial market with innovative tools to mobilize funds to the private sector, and especially to small businesses,” said Sanaa Abouzaid, IFC Manager for Central America.
IFC’s investment in Fedecrédito is supported by the Women Entrepreneurs Finance Initiative (We-Fi), a blended finance facility, through a performance-based incentive aimed at incentivizing the provision of financing for women-owned SMEs.
In addition, through its Women’s Banking program, IFC will advise and share international best practices to help Fedecrédito enhance its value proposition for this market.
As the first DPR transaction with a global gender approach to assign funds for women-led productive ventures, El Salvador will become a showcase for the rest of the countries in Central America that are also heavily dependent on remittances.
“At FEDECREDITO we recognize the important role that micro, small and medium-sized enterprises play in the country’s economy, as well as low-income people at this difficult time.
That is why it fills us with pride to partner again with IFC to continue working on offering innovative options that will expand access to financing of these segments and promote the economic recovery of our beloved El Salvador,” said Macario Armando Rosales Rosa, President and CEO of FEDECRÉDITO.
IFC’s operation in Central America has a strong focus on strengthening the financial systems of countries in the region, mainly to reduce the financial gap by scaling up financing to MSMEs, women entrepreneurs and the access of low- and middle-income families to affordable housing.
African Eye Report